Interview with Leigh Sales

ABC TV Lateline

Friday, 5 February 2010

If the first sitting week of this election year showed us anything, it's that the climate change debate didn't lose any heat over the long summer break. The new Coalition Leader Tony Abbott released a policy to deal with what last year he labelled "absolute crap" and with the polls tightening the Government wasted no time in attacking it.

For our first Friday forum of the year, I'm joined in our Sydney studio by Financial Services Minister Chris Bowen and the shadow immigration minister, Scott Morrison.

Good to have you both with us. Welcome to Lateline for 2010.

CHRIS BOWEN:

Good to be back.

SCOTT MORRISON:

Hi, Leigh.

SALES:

Kevin Rudd says that of the 8.8 million families in Australia, 8.1 million will be compensated. So Chris Bowen, why are 700,000 Australians carrying the load for the whole and who are they?

CHRIS BOWEN:

Well, we are putting every dollar raised by the CPRS into compensation for families and for businesses to make sure that we ease the burden…

SALES:

That's not the question, though, is it?

BOWEN:

Well, I'm getting to the question, Leigh. But we are maximising the compensation at the lower end of the spectrum, the income spectrum. We make no apologies for that. Of those 8.8 million Australian households, as you say, 8.1 million receive compensation. Almost three million households, low-income households, on average will be about $190 a year better off because the ...

SALES:

Does that mean the 700,000 high-income families?

BOWEN:

Yes. Yes, it does.

SALES:

So why should they bear the disproportionate load?

BOWEN:

Well, because we do have a progressive system in Australia and because there is a cost to be paid from dealing with climate change. I know the Opposition says you can deal with it at no cost. We don't. We are upfront with people. And so there's a cost to be paid. We will ease the transition. We will make sure that we compensate people at the lower and middle-income level, but there will be high-income earners who aren't compensated. We've said that upfront from day one and we make no apologies for overcompensating at the lower end of the spectrum, of the income spectrum, to make sure that nobody is worse off at that lower end.

SALES:

But you point out that we have a progressive system. So rich people pay more tax already. You're looking to means test the private health rebate. Why should these people have another burden in terms of bearing the cost of your ETS?

BOWEN:

Well, these things are always a balance and we always look carefully at these decisions when we make decisions about means testing. We always look very carefully at the distributional analysis. We always bear in mind the total picture, for example, there have been tax cuts at the upper end of the income spectrum under both the previous government and us, and that's appropriate. But you've got to balance these things, and when you're making a change, you always make sure that people in low and middle incomes, in particular, won't be worse off.

SALES:

Okay, Scott Morrison, let's talk about your new policy. It has to be funded by something. Is it going to be higher taxes or government spending cuts?

MORRISON:

It's $3.2 billion out of $1.3 trillion. I mean, that's a day at the office for savings for a Coalition government. We're talking about a rounding error here. And let me make this point.

SALES:

So savings, what do you mean savings, then: cuts in government spending will it be?

MORRISON:

Savings within the budget. I mean, it's $3.2 billion over a massive budget over a period of three years. I mean, $3.2 billion; let's just put it comparison. We're going to spend $20 billion on interest payments in the next three years. $20 billion in interest payments courtesy of the debt incurred by this government. Now that puts our policy, you know, which is going to fund the greatest moral challenge. Now if that's the greatest moral challenge, I assume paying back debt must be the Government's greatest moral challenge.

But can I pick up something that was said earlier, though? I mean, the Government is not going to fully compensate 8.1 million Australians. In fact, 6 million Australians are not going to be fully compensated. Nineteen per cent increases in electricity prices and if you're earning anything over more than about $60,000 or $65,000, then you'll be worse off and the Government won't guarantee they won't be worse off.

SALES:

Let me stick to your policy.

MORRISON:

Sure.

SALES:

You talk about savings are going to be easy to find. Okay, your portfolio, Immigration: where are the savings there? Fewer boat patrols?

MORRISON:

Well, I'll go back to my old portfolio when I was in Housing and the first home savers' accounts. I mean, that program is massively under-subscribed. I mean, if the Government doesn't think that it could find $3.2 billion of savings in a budget of that size - $1.3 trillion over three years - then they should give the game away. They clearly don't know how to manage a budget. That's how we reduced a debt from $96 billion to zero. That's how we delivered surpluses.

BOWEN:

That was a commodity boom actually. It was actually a commodity boom.

MORRISON:

It was all the mining boom! It was all external forces! Of course it was, Chris. I know that's your narrative. But the fact is: we managed the budget; we know how to manage budgets. That's what we do; that's what we will do to pay for this policy.

BOWEN:

Cut foreign aid perhaps or public service cuts?

MORRISON:

No, that's been ruled out - you know that.

SALES:

Chris Bowen, I asked you before about cost and you immediately responded by talking about compensation. Penny Wong was on this program last night; she did the same thing, by my count, 13 times. I interviewed Julia Gillard late last year - same thing. How can viewers interpret that reaction to questions about cost when you instantly switch to compensation as anything other than you've got something to hide about the costs?

BOWEN:

No, we're being upfront; we're saying there are costs. We've said that from the beginning. We've said the costs of dealing with climate change are less than the costs of not dealing with climate change. But we've said there are costs. Tony Abbott and Scott and his team say, "We can fix this with no cost." Now, that is frankly being dishonest with the Australian people. We're not.

We've been upfront and said there are cost, but there's also compensation. Now Leigh…

MORRISON:

Not for everyone. Not for everyone.

SALES:

But Scott Morrison, they have said that there are costs.

MORRISON:

Well, there are costs. We're spending $3.2 billion - you know, how much they'll be spending on ...

BOWEN:

To let emissions go up.

SALES:

Are you being honest about the costs?

MORRISON:

On electricity generators alone they plan to hand out $2.7 billion over three years under their scheme. Now that's more than our actual fund, and they say that it's only polluters who'll pay under our scheme. They will be paying - the electricity generators - $2.7 billion.

BOWEN:

Yeah, but you're not going to require any reduction in emissions…

MORRISON:

$2.7 billion over three years.

BOWEN:

You're not going to require any reduction in emissions…

MORRISON:

We will be giving them incentives to reduce their emissions and we're going specific with direct action on specific power stations. You're spending 1 per cent on direct action. 1 per cent!

SALES:

I asked Chris Bowen about cost and trust and how could people trust. How can people trust you when you're coming up with a policy that is so much less than the Government's policy?

MORRISON:

Well, their money is a money-go-round. Basically they tax it all and then they hand it all back out, and they spend virtually nothing on actual direct action programs. So we avoid all of that and we say, "Let's go and work on carbon in the soil. Let's go and plant some trees. Let's go put some solar panels on roofs and schools and homes and let's go out there and actually give people incentives to reduce emissions directly in things like power stations and the like." That's called direct action. I know the Government's not keen on direct action. They would like to immerse all of this in a massive bureaucracy and a massive tax and spend machine. That's what their system is. If they think that's a better way to do it, well you explain it to the Australian people. I think they understand what we're saying.

SALES:

Chris Bowen, the ETS is back before the Parliament this week. We all know that the chance of it getting through the Senate is negligible. What happens then?

BOWEN:

Well, we have said that we have put this to the Senate repeatedly because this is so important. This is so important to the future of the planet and the environment and we will continue to argue vigorously for this…

SALES:

But it's probably not going to get through, is it?

BOWEN:

…but, look, the odds are long because of the recalcitrance of the Opposition, despite the fact that two months ago the majority in the party room, and presumably Scott was one, voted for the ETS. And Scott has said previously in the Parliament that he thinks an ETS is part of the toolbox and it should be there and now he's changed his tune.

MORRISON:

Not yours though. I never said yours! I never said yours! Never said yours!

I'll ask you about that in a minute, but what happens when your ETS doesn't get through the Senate?

BOWEN:

Well, look, we have to abide by the decision of the Senate, but nevertheless we'll continue to argue that an emissions trading scheme and a CPRS is important for Australia.

SALES:

Will it be dead at that stage?

BOWEN:

Well, look, we'll - we'll of course have to accept the decision of the Parliament, but nevertheless it remains our position that when you're dealing with climate change, a CPRS is a very important part of it.

Now, the Opposition, as I say, thinks that they can have a placebo, that they can just have, "We'll have direct action." This is direct action that their own report, the Shergold Report, found would not work. This is direct action that the Wilkins report found was wasteful and simply wouldn't work. This is a placebo from a party which is in cahoots with the nuttiest elements of the extreme climate change denial right. And that's what we're getting from Tony Abbott.

MORRISON:

Don't forget witch burnings.

SALES:

Well, let me put to you, Scott Morrison, picking up on that point. Barnaby Joyce earlier in this week on the program said that he had doubts in certain areas about climate change, but that there's a general feeling people want action. So to pick up on Chris Bowen's point, has he let the cat out of the bag there that this isn't a plan that the Coalition believes in, but of political convenience?

MORRISON:

No, I think that's putting words in to his mouth. It's a plan for action. It's a plan to put trees in the ground. It's a plan to put solar panels on roofs. It's a plan to actually do things that are going to be constructive rather than a great big tax.

SALES:

Well, did you vote for the ETS and you've now had a change of heart?

MORRISON:

Sorry?

SALES:

Did you vote for the ETS in the party room and you've now had a change of heart? Were you lined up with Malcolm?

MORRISON:

We voted against the ETS twice in the House of Representatives. I spoke against it twice in the House of Representatives.

BOWEN:

What about in the party room?

SALES:

In the party room when you were looking to change leaders and the option was staying with Malcolm Turnbull and the ETS or switching, what was your decision and have you now had a change of heart with this new policy?

MORRISON:

I have always had reservations about the Government's scheme. I mean, that's why we wanted to change the Government's scheme. And the Government at the end of the day frankly want to persist with that scheme and it's a scheme that Australians don't want because they see it for what it is, which is a great big tax.

SALES:

Is this a good point that Scott Morrison makes, that their policy is quite easy to understand and it's easy to explain to the Australian people. And then now, you know, many months after you've first brought out your ETS, people still don't really understand it?

BOWEN:

That's true to this degree, Leigh: the Liberal Party have decided to put their own political self-interest ahead of the future of the planet. They have decided in the battle between complex truths and simple lies to side with simple lies. That gives them an advantage. I accept that. That doesn't mean it's the right thing to do. It means it's the easier political thing to do. It means it's the opportunistic thing to do. It does provide us with political challenges. I do accept that point. But it's a challenge that we're up to because it is such an important issue that we are engaged in a conversation with the Australian people about the complex truths of climate change: the fact that it's real and the fact that there is a cost to dealing with it. The Opposition is squibbing it for their own political purposes.

MORRISON:

This is the problem I think the Government has: they want to turn this into a moral debate about climate change. It's a simple debate about two plans - two plans: one for direct action, one for a great big tax. People can make their choice.

SALES:

Alright. Let's whip around a few other things that I want to discuss. Scott Morrison, according to the polls, the Coalition is no longer preferred as economic manager over Labor. Is having Barnaby Joyce as Finance Minister really going to help you regain that mantle?

MORRISON:

I think one of Barnaby's great virtues, as I've said on this program before, is he's a very authentic individual. What Barnaby has talked about is this: is there are some very practical decisions that we have to take in order to manage a budget. Now Barnaby's used to managing budgets from his own experience prior to coming into the Parliament, and these are the issues he's canvassing. He may not be canvassing them in the way that people in the commentariat like, but ...

SALES:

Does he belong in a key economic role on the frontbench?

MORRISON:

Well, of course he does. That's why he's there.

SALES:

When people look at Barnaby Joyce vs. his Government counterpart Lindsay Tanner, who do you think that they trust more?

MORRISON:

Well, if I look at Lindsay Tanner, he's the one who's run up the biggest amount of spending in our country's history and is throwing us into the biggest amount of debt that the country has ever been into. So, I think Australians will make their judgement on Lindsay very harshly as a result.

SALES:

Let me stick with Barnaby Joyce for now, but I will come back to that point in a moment. Chris Bowen, the Government jumped on Barnaby Joyce this week; in fact Lindsay Tanner called him the "bearded lady" of Australian politics. But do you and the media risk turning all politicians into grey robots if we jump on the ones who occasionally deviate from the line?

BOWEN:

It's not about deviating from the line, Leigh. This is about a person in a very senior economic portfolio who gets fundamental economics incorrect. Now the Australian people face a choice later in the year. It's a choice about who they trust with the Australian economy: Kevin Rudd and Wayne Swan, who saw us through the global financial crisis as one of the world's best-performing economies, or Tony Abbott, Joe Hockey and Barnaby Joyce? Now can you imagine Barnaby Joyce sitting in the Finance Minister's chair in those 72 hours following the collapse of Lehmann Brothers when the Australian economy was on the brink? Can you imagine Barnaby Joyce in charge? That's one of the questions.

SALES:

Would you be comfortable with that Scott Morrison?

MORRISON:

Of course I would and I don't have to imagine what this Government was like in that chair, because what I saw this Government do is embark on the greatest spending binge we've ever seen in this country in peace time. And we're going to be paying for binge for programs in 2012 that are supposed to get us out of a recession in 2008.

BOWEN:

A recession we avoided.

MORRISON:

It was all down to you, wasn't it? You guys, you're supermen. You were absolute supermen.

BOWEN:

Australia avoided, the Government avoided, business avoided and Australians avoided.

MORRISON:

You're going to make the sun come up tomorrow as well, I'm sure. Very talented.

BOWEN:

The question is would Barnaby Joyce - would you trust Barnaby Joyce in that chair?

Let's pick up on some of the economic points and some of the points you've made, Scott Morrison, there. We have seen some economic news around the world this week that's a little bit pessimistic. We saw the Reserve hold on interest rates for the time being. Doesn't that show that the Government is right to not wind back the stimulus too quickly?

MORRISON:

I think it shows that it's important that we keep interest rates low. We had three successive interest rate rises over the back part of last year. And I think the pressure that is put into the system about the Government's excessive spending is going to put further pressure on interest rates. Remember, interest rates flow through to everybody. They flow through to small business; they flow through to families; they flow through to households. These people end up paying more for interest rates. We're already seeing the cost of living going up. We don't need anything more added to that because this Government wants to spend before an election.

SALES:

The Reserve's anticipating raising interest rates perhaps three more times before the end of the year. That's going to be less than ideal for the Rudd Government, isn't it, in an election campaign?

BOWEN:

Well, of course, Leigh, I don't have the luxury of speculating on what the Reserve Bank does, but they have indicated that they see interest rates at historic lows - of course they are. They've increased them by 75 basis points. They're still 350 basis points lower than they were. So, fiscal policy will be more contractionary in all likelihood than monetary policy over the next 12 months. The Reserve Bank have indicated, if you like, a tightening tendency from here, but monetary policy will still be quite expansionary and appropriately so, and we will deal with the politics of that as a secondary issue. You've got to deal with the policy first.

SALES:

There was a story on the front page of The Australian newspaper today about a business that's had to let some young employees go because it can't give them the minimum shifts required under the Fair Work laws, even though the kids actually don't want longer shifts. Julia Gillard says that there are some options in the legislation that I think it's possible that we can work through this and make arrangements with the employer. Are you going to have to make arrangements with every individual employer who finds your Fair Work legislation not flexible enough?

BOWEN:

No, look, I know Scott's about to embark on a defence of WorkChoices, but WorkChoices was voted on at the last election. Now my understanding is that there is enough flexibility for those sorts of situations.

MORRISON:

I'm going to surprise you Chris. I'm going to surprise you.

BOWEN:

Well, you'll be the only one. You might have to resign from the frontbench if you're not going to defend WorkChoices, because you'll be breaching party policy and you'll be not very popular.

MORRISON:

I don't know where you've been the last two years, but anyway, I'll let you make the point.

BOWEN:

You won't be very popular with your new leader. But we have flexibility in the system. You need to strike a balance. You can't have employees being called in for half an hour and being forced to work and then sent home. You need to strike that balance. But obviously you need the flexibility.

SALES:

But I wonder how many more of these cases are out there that could be just dribbling out over the year?

BOWEN:

Well, look, the new law's been in place for some time. This is the first one of these cases that we've heard about. I'm sure it'll be worked through in a sensible way. There's enough flexibility in the system. Julia Gillard has said that. We do have those mechanisms in place and a sensible outcome needs to be reached.

SALES:

Scott Morrison?

MORRISON:

Kevin Rudd said no worker would be worse off under their scheme. Today he said on 3AW in Melbourne that oh no, that was just a principle and he could never give that guarantee. Well, if Kevin Rudd can't keep that promise from the last election, I don't know why anyone would believe he'll keep his promises at this one.

SALES:

Gentlemen, we're out of time. Chris Bowen, Scott Morrison, thank you very much for coming in.